Transcripts of the monetary policymaking body of the Federal Reserve from 2002–2008.

Part of the difference is the weighting that they use. First, our number is total foreign, whereas their number is world. However, the U.S. numbers are probably below average. If anything, we should go the other way, although in the past it has worked my way. [Laughter] Second, we use weights based on U.S. export behavior. We’re trying to construct a variable that we’re going to then put into an equation or use in thinking about the volume of U.S. exports. They’re describing global economic activity. So they tend to use GDP-type weights, and we use U.S. export weights. That puts a lot of weight on Canada in our number, and Canada is on the lower side on growth, relative to the average. In their case, especially if they use PPP (purchasing power parity) weights—and I believe that they do in most of the numbers you see— that puts a lot of weight on China and China’s growth and more weight on China’s growth than we put. That raises their average. Thus, some of the differences are due to differences in weights.

Nonetheless, there is a real country-by-country difference in that we are on the low side of their numbers—for example, for the euro area and certainly for the United States, although the United States isn’t in our total foreign number. But were we going to put it in and mentally calculate some kind of average, the United States would be a part of that story, and Europe would be another part. I guess maybe we’re just reading the current data a little differently. We’re not as persuaded that Europe is really going on a sustained growth episode. We have Japan doing fairly well, but we have numbers in the ones and not any higher. So I think we are a little bit less optimistic, if that’s the word, about the pace at which foreign growth will continue. We see the monetary policy actions that people have taken, we see the slowdown in the United States, and we’ve got a slower picture for the rest of the world.

Keyboard shortcuts

j previous speech k next speech